BlackRock published a new research report titled “Re-Underwriting Bitcoin,” arguing that bitcoin’s roughly 50% decline from its October 2025 all-time high near $125,000 was driven by overleveraged positioning and flow rotation rather than any breakdown in its fundamental investment case.
Overleveraged futures triggered the crash
The report, authored by BlackRock’s digital assets team led by Will Su and Robert Mitchnick, traces the selloff back to a single catalyst on October 10, 2025, when U.S. tariff announcements against China hit global markets.
At that point, bitcoin futures open interest had ballooned to over $90 billion, with 80% concentrated in offshore perpetual futures offering leverage as high as 125x.
The resulting liquidation cascade wiped $20 billion in open interest in a single day, the largest on record.
The report described the aftermath:
“The resulting liquidation waves drove prices down to cycle lows below $60,000 per bitcoin by June 2026.”
Capital rotated from bitcoin ETPs into AI funds
Spot bitcoin ETPs attracted a historic $60 billion in inflows between their January 2024 launch and October 2025, but then suffered roughly $5 billion in outflows.
During that same period, AI-themed equity ETFs captured $46 billion.
BlackRock framed the shift as cyclical rather than structural:
“We view the rotation into AI-exposed equities likely competed for capital and became a net drag on investors’ bitcoin allocations. Conversely, a normalization could lead to a return to structural inflows for bitcoin and other cryptocurrencies over time.”
Strategy’s test sale rattled markets
The report highlighted how Strategy, the largest corporate bitcoin holder with roughly 4% of circulating supply, spooked the market in early June 2026 when it disclosed a test sale of just 32 bitcoin.
In July 2025, Strategy had issued its first preferred stock, STRC, raising $10.5 billion that funded an acceleration in bitcoin accumulation.
Bitcoin fell approximately 20% and traded below $60,000 for the first time since 2024.
BlackRock noted:
“In subsequent weeks, Strategy introduced an updated capital allocation framework that authorized potential bitcoin sales to fund equity and preferred repurchases.”
Every major fiat currency has lost 99% against gold
A central argument in the report is bitcoin’s role as a monetary alternative in a world of persistent dollar devaluation.
BlackRock presented a 100-year chart showing that every fiat currency issued by the world’s dominant economies at the turn of the 20th century has lost more than 99% of its value against gold.
The authors wrote:
“These fiscal dynamics reinforce the strategic case for assets with supply constraints beyond the discretion of central banks, governed by geology in the case of gold and mathematics and code in the case of bitcoin.”
Volatility trending lower despite leverage risks
Bitcoin’s trailing 12-month volatility has declined from regular spikes above 100% a decade ago to around 40% today, a trend BlackRock attributes to the maturation of market structure including CME futures, listed options, and spot ETPs.
The report concluded:
“We continue to believe that long-horizon investors are likely to increasingly consider a measured allocation to bitcoin as a strategic complement to their conventional holdings.”
